Let's hear your explanation of the "conundrum"

This is along the lines of what I think is really happening in real estate...its not a "real estate" bubble, it's a "credit bubble". Real estate is the latest mainsfestation of cash looking for a home. Only the cash isn't coming from the buyer, it's coming from the lender. Does anyone on this board know of anyone who has been turned down for a mortage in the last 3 years? How much would real estate really be worth if rates were 9% and you needed 20% down?



Quote from mtzianos:

It's simply the Asian Central Banks, who are buying dollar-denominated assets to maintain their USD-peg (mostly China nowadays, Japan and Korea in the recent past)

The paper money to do this, is mostly created out of thin air (i.e. non-sterilized interventions). Also China re-routes "hot" money which comes into the country to bet on the reval, back into USD.

This has the effect of asset (bonds, real estate, stocks etc) price inflation.

Per the experience of many people (myself included) it's also causing inflation in many basic goods. But the orwelian "Ministry of Truth" and the mainstream press insist that CPI runs at 2-3%

The whole scheme is a big experiment of man-kind to find out if we can borrow our way into financial prosperity.

Look at the charts of last 3 years:

Stocks up
Bonds (30yr bond yield touched all time lows today) up
Real estate (ultra-bubble) up
Commodities (CRB, GSCI) up
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Quote from drsteph:

That was the whole point of Bush's 'private savings' Social Security reform package - to inject a massive stimulus into the equity market by allowing entry of the huddled masses into the equity markets through their social security accounts. Too bad for Wall St. it didn't go through.


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Point of Bush's plan is to but SS on solid footing as a bonafide retirement vehicle.

Bush could care less about Wall Street.

John
 
Quote from McCloud:

"As US rate conundrum deepens, Wall St has answers"

http://www.reuters.com/newsArticle....CYCRBAE0CFFA?type=reutersEdge&storyID=8688090
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Yeah, right.

Please take note that in that article there was not a single reference to the fact that Asian CENTRAL BANKS (i.e. bureaucrats following orders from their political supervisor) buy 30-50% of the debt issuance in US (government and agency debt)

This price-insensitive (i.e. "I don't care how low the yield is, I have orders to buy $X billions this week")

This number currently is $3bn per business day. And this is NOT money saved by some working men in Asia and willingly invested in US bonds, it's mostly money created from thin air.
 
The most recent official Treasury quarterly stats are here:

http://www.treas.gov/tic/mfh.txt

The disturbing trend that has been mostly ignored by the presstitutes is that purchases by Japan and China have been flat to down.

The shortfall appears to have been picked up almost entirely by the "Caribbean Banking Centers" aka hedge funds.

Ever wondered why Greenspan et al are so worried about regulating the hedge fund industry?
 
Quote from originalskunk:

The most recent official Treasury quarterly stats are here:

http://www.treas.gov/tic/mfh.txt

The disturbing trend that has been mostly ignored by the presstitutes is that purchases by Japan and China have been flat to down.

The shortfall appears to have been picked up almost entirely by the "Caribbean Banking Centers" aka hedge funds.
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I wrote about this in a quite detailed series of articles a couple of weeks ago. In my prior message I was talking about government AND AGENCY (e.g. FNM) debt.

Last few months US Treasury's demands were lower (because of the windfall tax income from fictional capital gains tax, due to asset inflation). So Treasury issued less new debt. Last few months the FCBs are buying mostly agency (e.g. FNM) paper.

So they still buy dollars, but debt of different issuer (FNM rather than US Treasury) Also, lately China has been covering its tracks a bit better.

By revaluing (which US is pressuring them to do and they eventually will have to do), they know they're going to have to take a HUGE loss on those holdings. Which is why I think the rise of USD of last few weeks was engineered by FCBs to maybe try to diversify into fund long-liquidations/short-initiations. Just a theory of mine.

In any case, even if the FCBs continue to accumulate USDs, I very much doubt that the US will pay those USDs back with MORE VALUABLE dollars.

Some people argue that China will continue the "vendor-financing" of the US, until they've created enough jobs for their population. A process that could take up to 10yr.

I very much doubt these growing imbalances will exist for such a long time.
 
I posted this on 5/3/05. I still stand by this:

trade-ya1


Registered: Oct 2003
Posts: 762


05-03-05 06:31 AM

Good thoughts. I agree. Bullish case for bonds:


1. Very strong periods of growth over last ten years (5%+ GDP) yet inflation (as measured by gov't statistics) did not materialize inflation (remember 1993?). Is inflation going to materialize with the moderate growth we have now?

2. Unprecedented wealth creation from 1995-2000 due to rise in equities, particularly NASDAQ, yet, couldn't materialize inflation (as measured by gov't statistics). Current wealth creation in Real Estate.

3. Signficant globalization of labor-very deflationary.

4. Technology (read: Internet) very deflationary. Ever try to buy a shovel in Kansas 10 years ago? One had to pay the ask at the local hardware store, now can log onto homedepot.com and pay the most efficient price.

5. Global rates very low and US actually at the upper end of developed world rate scale. Japanese bonds are less than 1%, etc. (shows you where they can go).

6. Economic growth is moderating almost across the board.

7. Equities are unstable (NASDAQ -11% YTD).

8. Nobody is positioned well, everyone assumes rates going higher. Only a tiny minority positioned for lower rates, despite....

9. Most important reason- Price Action! With all the higher rate talk, 10-yr. is significantly lower in yield than it was a year ago at this time.

10. Greenspan Fed is historically dovish and has a bark worse than it's bite. Greenspan has a dual responsibility, fighting inflation BUT, also, allowing employment to grow at it's fastest possible rate without the creation of insidious inflation. Greenspan is very conscious of this and is probably very close to neutrality on Fed Funds.

11. Market is anticipatory rather than reactionary.


Biggest risk- Changing of the guard at the Fed.
 
Quote from trade-ya1:


Biggest risk- Changing of the guard at the Fed.
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That's what I wonder about. Greenie's been the man since I've been full time in the markets. How'd things go when Volcker left?
 
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